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Deaton v. Overstock.com

December 27, 2007

SHANDIE DEATON, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
OVERSTOCK.COM, INC. AND DOES 1-10, DEFENDANTS.



The opinion of the court was delivered by: J. Phil Gilbert District Judge

MEMORANDUM AND ORDER

This matter comes before the Court on Defendant Overstock.com, Inc.'s (Overstock) Motion to Dismiss, Transfer Venue, or Stay (Doc. 13). Plaintiff Shandie Deaton (Deaton) has Responded (Doc. 17) and Overstock has Replied (Doc. 21). For the following reasons, the Court GRANTS the Motion to Dismiss.

BACKGROUND

Overstock is a leading internet retailer of name brand surplus and close-out merchandise with its principal place of business in the state of Utah. Unlike traditional retailers, Overstock has no "brick and mortar" facilities wherein consumers browse or purchase goods. Instead, Overstock is a "virtual store" accessible only via the internet. Consumers log on to Overstock's secure website and conduct their transactions there. Consumers can freely access Overstock's website, however, upon submitting an order, consumers must agree to the website's terms and conditions, the relevant portion of which reads as follows:

Entering this site will constitute your acceptance of these Terms and Conditions. If you do not agree to abide by these terms, please do not enter this site.

By visiting the Site, you agree that the laws of the state of Utah, without regard to principles of conflicts of laws, will govern these Terms and Conditions in any dispute of any sort that might arise between you and Overstock.com or its affiliates or subsidiaries.

Any dispute relating in any way to your visit to the Site or to products you purchase through the Site shall be submitted to confidential arbitration in Salt Lake City, Utah....

To the fullest extent permitted by applicable law, no Arbitration under this agreement shall be joined to an arbitration involving any other party subject to this Agreement, whether through class arbitration proceedings or otherwise. The rules of the American Arbitration Association (AAA) govern the arbitrations.

On August 17, 2007 Deaton submitted an order on Overstock's website and paid for it with a credit card. Overstock's verification of Deaton's information included the last four digits of her credit card and the card's expiration date, which Deaton contends violates Section 1681c(g) of the Fair Credit Reporting Act (FCRA). Deaton subsequently brought this action, seeking, for herself and others similarly situated, the statutory damages allowed by the FCRA of "not less than $100 and not more that $1,000" for each of Overstock's violations of Section 1681c(g).

Overstock moved to dismiss the action, contending that the instant action is a dispute governed by the mandatory arbitration clause to which Deaton had contractually agreed. In the alternative, Overstock moved to stay the action or to transfer it to Utah. Deaton counters that the mandatory arbitration clause is unenforceable because arbitration would be so expensive as to effectively preclude her from vindicating her federal rights under the FCRA. Deaton also contends that the mandatory arbitration clause is unenforceable because it unconscionably prevents consumers from joining together in a class action, which may be their only effective way of protecting their FCRA rights.

ANALYSIS

I. The Claim is Covered by the Arbitration Clause

The Federal Arbitration Act (FAA) provides that a "written provision in any ... contract ... to settle by arbitration" any future controversy arising out of such contract "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. Congress designed the FAA "to reverse the longstanding judicial hostility to arbitration agreements ... and to place [them] on the same footing as other contracts." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991). "Any doubts with respect to arbitrability therefore should be resolved in favor of arbitration." James v. McDonald's Corp., 417 F.3d 672, 677 (7th Cir. 2005) (citing Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983).

Here, the parties agree that the FCRA claim is covered by the arbitration clause. However, Deaton asserts that the clause should by invalidated as unconscionable because forcing her to arbitrate her claim would effectively preclude her from vindicating her federal ...


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